Talk:Gold as an investment/Archive 2

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[edit] NPOV Discussion

OK, I archived the old talk section because it was very large. I've read the artcle and it seems quite resonable. I am taking the Neutrality dispute tag off of it unless someone really feels that this article is biased somehow.

When you archive it's a good idea to copy any live discussions to the new page.gb 15:29, 11 February 2007 (UTC)
I think there are some serious unsourced-statement problems in this article. Although I've never read it in its previous incarnations and don't know how it's been improved, in particular some of the comments about "gold bugs" seem non-NPOV. In particular, comments claiming that certain "gold bugs" "hope for" another Depression or Armageddon ought to have a source, since it effectively slanders a group without a source. --Kadin2048 01:28, 8 March 2007 (UTC)

[edit] Gold and the Great Depression

Article states that gold bugs 'hope for another Great Depression'. This implies that there are sources stating that gold value was greater during TGD. This makes no sense since TGD was caused by deflationary pressure and iliquidity where assets including gold would be loosing value in currency terms. Can anyone shed some light on this? If not, this needs to be removed from the article. gb 21:38, 9 February 2007 (UTC)

The Causes of the Great Depression are hotly disputed. Some economists argue that inflation of the US money supply by the Federal Reserve played a role in causing and lengthening the Great Depression. For those who are inclined towards this theory (and others), gold is a hedge against inflation because central banks engaged in inflation can't "print gold." DickClarkMises 01:19, 10 February 2007 (UTC)
Gold and other material assets can be a hedge against inflation. However, that's not my point. If there are no references on gold being used as store of value during TGD, this statement is false and should be removed from the article or reworded to avoid reference to TGD.gb 22:57, 10 February 2007 (UTC)
Gold served as an excellent store of value during TGD, although if you were an American, you would have had to violate the law to keep it in your possession. But, if you would have done that (or if you were a foreigner) then you would have not had to worry about bank failures, and you would have seen the value of your gold appreciate when FDR switched the gold standard from $20 an ounce to $35. If you are curious as to how gold might perform in future deflationary depressions, that is a question that is subject to debate. Here is an article which discusses gold's historical performance relative to inflation/deflation. [1] Now, if it will make everyone happy, you can just change TGD to Hyperinflationary Collapse of 1920s Germany and be done with it. At the end of the day, who really cares the exact name you chose to use to describe the economy going to crap?Prestonp 17:23, 11 February 2007 (UTC)

[edit] History

The sentence "Central banks retain large gold reserves" is unverifiable. They are of course not given to making pronouncements on this topic and considerable gold holdings may in fact be leased out rather than actually "owned" by the central banks in question. See http://goldmoney.com/en/commentary/2007-01-29.html or http://www.gata.org/ Both of these cast doubt on this sentence! Therefore, I have gingerly amended it a little...Chris. Fulker 15:13, 14 February 2007 (UTC)

You may otherwise be right but that which is loaned is still one's property. Paul Beardsell 06:42, 22 March 2007 (UTC)

[edit] Graphs in Real Terms

Isn't it deceptive to show gold price graphs in nominal terms? Wouldn't it be much more informative to show an adjusted graph? It seems to me that the only thing that is demonstrated about "gold as an investment" by showing nominal gold prices is that gold is a better investement than dollar bills. Anyone care to justify the status quo on this one? Or should we start looking for an inflation adjusted graph? SJCstudent 14:52, 17 March 2007 (UTC)

Excellent point. I don't have the time to do it myself, but I'd certainly support anybody's decision to insert a properly inflation-adjusted table and graph. On the issue of just how ridiculous the current graphs "1793-2005" graph is: Recently I picked up Henry Blodget's "Wall Street Defense Manual," in which Blodget spends a good deal of time and energy making the point that inflation is what kills the efficacy of such investment "strategies" as hoarding gold (or cash, for that matter). To wit: One dollar invested in gold in 1802 would buy an amount of that precious metal worth $0.84 in 1997. Yes, you would lose money over the (admittedly very) long term if you just used your money to buy gold. (As for stuffing your mattress with dollar bills, seven cents in 1997 had the buying-power equivalent of a dollar in 1802, so that's obviously a terrible strategy--again, over the very long term, but the way things are going with the American economy these days, the long term might be shorter than we think.) Buck Mulligan 18:02, 17 March 2007 (UTC)
Other investments such as stocks are expressed in nominal terms. Gold should be no different to allow for ease of comparison. As for Mr. Blodget's anaylsis, he is mistaken. In 1802 $1 was one twentieth an ounce of gold. Today that is worth $32.50. Even at 1997's prices of say $250 an ounce it's still worth $12.50. Blodget was the one who said tech stocks would never go down, so I'd just ignore anything that dolt writes.Prestonp 12:45, 22 March 2007 (UTC)
Well, IP user 209.30.44.91, I'd watch who I called a dolt if I were you, because you obviously don't understand the point of this discussion. As such, let's break it down: First of all, the point isn't about whether Blodget's good at stock price-prediction. Nobody is, in the long run. End of story. On the other hand, the point is about the effect inflation has on the future value of an investment (i.e., on the buying power you sacrifice in the present for the buying power you expect somewhere down the road). And so, I'll take it slowly from the top, using round numbers for simplicity's sake:
Let's say you spent $1.00 on one ounce of gold in 1802. Now, let's say inflation in the following 195 years was such that what one dollar would buy in 1802 would cost $100 in 1997. If the price of gold kept pace with inflation, then you could expect to buy an ounce of gold in 1997 for $100. But—and again, this is the point that Blodget and SJCstudent and I are all making—it turns out that the price of gold has not kept pace with inflation over the long term. So even though your $100 in 1997 has the same buying power in general that a dollar in 1802 had, that chunk of gold that cost a buck back then could only be sold for $84.00, meaning that you'd have lost money on your investment, as measured in real terms.
Another analogy: Let’s say you having the option of either buying a gross of widgets today for $100 or buying $100 worth of gold from me on the condition that I’ll buy it back from you for $125 a year from now. If it seems like the price of widgets is only going to go up by 10% over the next year, then it makes sense to lend me the money, because spending $110 on widgets in a year will leave you with $15 to spare after you’ve sold me the gold. But let’s say you do buy the gold, only to discover a year from now that the price of a gross of widgets has actually climbed to $130. Well, you should have just bought the widgets, because the return on Buck Mulligan's gold was only 25%, while the cost of widgets increased by 30%.
Simplest analogy of all: Let's say I borrowed a hundred bucks from you today on the condition that I'd pay you back next week—except that I'd only pay you eighty-four bucks. Not a very good deal, and neither is investing in gold if you average the return on your investment over the long term and take inflation into account. And that's why we need a different graph. Buck Mulligan 06:15, 22 March 2007 (UTC)
Blodget almost faced criminal charges. As it was, he was written off as a press whore for the tech industry. I feel pretty comfortable calling him a dolt. When it comes to Gold, you're going to find these effects over that time frame largely because of the effect of the gold standard itself. Although picking 1802 is a bit weird. CPI decreased from 1800-1912 by a factor of a third. So your investment in gold (which was money at the time) would have increased over value over that period by the same amount. Now going from 1913 (the year the Federal Reserve came into existance) to 1971, inflation was widespread but you won't observe it in terms of gold because that's where the money was pegged. From 1971 through today, Gold had preformed as an appreciating store of value. It's price over that range has been suppressed because central backs sell their gold reserves from time to time, but that can't go on forever. Prestonp 12:45, 22 March 2007 (UTC)

Leaving the good-humoured bantering aside, I think a graph against the inflation linked price of the US dollar is a good idea. Paul Beardsell 06:41, 22 March 2007 (UTC)

As I said, other investments are given in nominal terms. I don't see why gold should be any different. Prestonp 12:45, 22 March 2007 (UTC)
Okay, first of all: Prestonp, do not place your responses in the middle of my posts (or anybody else's). It makes following the discussion confusing, and apart from that is just rude.
Next: This discussion isn't about Blodget, it's about INFLATION. Whether or Henry Blodget is a "press whore" or a "dolt" has no impact on the effect of inflation. The guy could believe the earth is flat and the moon is made of cheese and it wouldn't be relevant to the discussion. I only used his book as an example because it happened to be sitting nearby on my shelf. The fact that price inflation as a phenomenon exists, on the other hand, is beyond dispute, and if you doubt it then I really would like to borrow some money from you.
Next: The fact that other investments, such as the DJIA and the S&P 500, are given in nominal terms is also rather misleading, and these results should be adjusted for inflation for mostly the same reasons I listed above in the case of gold: the value of a company's stock is whatever people are willing to pay for it, and the value of gold is likewise whatever people are willing to pay for it. Quite often, these values do not remain in step with the price of everything else people buy.
And finally: Prestonp's last posting contains an odd statement, namely that the price of gold has been "suppressed" over the past 36 years. I wonder if he means something like what the author of this web page means when he says the same thing—namely, that gold is "really" worth much more than it's currently selling for. This is an incoherent argument for a number of reasons, but the most glaring is that the value of any commodity simply is what people are willing to pay for it. If everybody came to their senses tomorrow and decided that gold wasn't worth paying much more for than any other (somewhat) rare and useful commodity, then its price and its value would take a nosedive. But what's interesting to note in this connection is that, while the premise of the discussion on the aforementioned web page is totally ridiculous (i.e., even though its price has risen a lot lately, gold is still cheap and its price will—indeed must—continue to climb because, so the author claims, when adjusted for inflation it's going for the 1971 equivalent of US$144 per ounce), it nevertheless contains one kernel of good sense: IT'S ADJUSTED FOR INFLATION, and it demonstrates that buying gold in the seventies and hanging onto it until today would have been a terrible idea. In other words, even the sort of dolt (yes, dolt) who, if he'd been around in the 1650s, would have argued that the price of tulip bulbs must rise again because twenty years prior people were paying through the teeth for them can still see the importance of inflation-adjustment. What I can't understand is why this point seems to elude so many other people. Buck Mulligan 18:58, 22 March 2007 (UTC)
As an afterthought: Something else I can't understand is why Prestonp, who I'm guessing does actually understand all this stuff, would be so adverse to expressing the value of gold in real terms. Seriously. Why would anyone go out of their way to defend this kind of misleading approach to gold's valuation on an encyclopedia page? If I can find an inflation-adjusted chart for the price of gold, I'm adding it. Buck Mulligan 19:03, 22 March 2007 (UTC)
Please do. I agree, the POV Prestonp is trying to push is that gold is a good investment. Well, not if it's price lags behind inflation. If it's a good investment the inflation adjusted chart will make Prestonp's point, and if not, not. Paul Beardsell 22:52, 22 March 2007 (UTC)
Hey Buck. Markets can be manipulated and a given commodity can be made to be artifically cheap or artifically expensive. There are compelling reasons to believe we have been witnessing that in the Gold market. You're statements indicate you don't agree and that's fine. In terms of adjusting Gold's performance for real dollars, my only concern is that it also includes a nominal dollar analysis. Many investing truisms and perfomance benchmarks are given in nominal terms and those figures should be readily available for comparison.Prestonp 20:56, 22 March 2007 (UTC)
Hi there, Prestonp. You're right to point out that performance benchmarks are generally given in nominal dollars, and, while this has always annoyed me a bit, I suppose that in itself is a reasonable justification for keeping the current table and graphs. However, I don't see the harm in adding another, inflation-adjusted table to the page. Anyone object to that?
As for the artificial manipulation of commodity prices, what I was rather clumsily trying to say in my last post was that gold is a commodity unlike other commodities in the sense that its price depends a lot more than, say, grain or fava beans on the value that people have arbitrarily assigned to it. While it's true that gold has a lot of practical uses, from circuitry to dental work, and it's also true that it's a relatively rare element, I don't think it can be seriously denied that the real engine of gold valuation is people's conviction that the stuff has some mysterious value, in and of itself. A historical accident and nothing more than that since, let's be honest, fava beans are a hell of a lot more useful than gold. Anyway, all of this is to say that when people start talking about artificial price manipulation in the context of gold I'm inclined to say something like, "well of course--the price of gold has always been artifically high."
Okay, that's it. I changed my caption over the graph to something a bit less polemical, and if my tone in this discussion has been somewhat polemical as well, I apologize. Buck Mulligan 22:31, 22 March 2007 (UTC)
Buck, I have no objection to your adding a real value graph. Your arguments regarding Gold betray a certain prejudice you've inhereted from the sources your reading. The short answer is that people all over the world value Gold and that's not going to stop. Put yourself in the shoes of a monied person in Venezula for a moment. Chavez could decide to freeze that person's accounts, or nationalize the industry he's invested in. How would you preserve your wealth when property rights are in question? You might argue that this hypothetical Venezulean should invest in American stocks in an American account, but if that person has to flee the country, he's going to need a liquid form of wealth that is readily available at a moments notice and not subject to currency devaluations. That narrows the field to precious metals and little else. If you're curious to read a respectably presented case for the presence of manipulation in the Gold market, I'd encourage you to visit www.gata.org. If you're willing to indulge a much more blogsy and conspiratorial analysis, you might check out http://www.the-privateer.com/gold-a.html. Prestonp 22:56, 22 March 2007 (UTC)
I, for one, am glad you have seen fit to change your position regarding the graph. Paul Beardsell 02:40, 23 March 2007 (UTC)
Paul, I really don't see where I changed my position. I still don't see why we need an inflation adjusted graph of gold considering virtually all tradional investment vehicles have stated ROIs or graphs in nominal terms, but if he wants to do it as an additional thing great. I do resent the notion that I am "pushing" gold. Hey, you don't want to invest in, that's just more for me. If you want to debate the merits of the investment fine, but you're not going to change my portfolio allocation or the fact that gold crushed stocks over the last 6 years. Prestonp 03:17, 23 March 2007 (UTC)
Once you were against the inclusion of an inflation corrected graph. Now you don't mind. I said "I, for one, am glad you have seen fit to change your position regarding the graph." Regarding the graph. Paul Beardsell 07:12, 23 March 2007 (UTC)
I actually don't see a change in Prestonp's position, but that's cool; I wasn't trying to change anybody's opinion, just trying to promote the idea of adding another graph. And, since nobody seems to be against that idea, I guess I'll start looking for something expressed in constant dollars.
I'm also definitely not trying to influence anybody's portfolio allocation, Prestonp. Nor did I interpret your comments as being motivated by some desire to push gold. If you're a gold-buying kind of guy, then good for you; these have, as you say, been very good years indeed for people who bought gold after 9/11. You also make a good point about liquidity; if I were a wealthy Venezuelan I'd really be hating my options with anything besides gold right now (although diamonds might actually be a better way to go, come to think of it, since they're smaller and lighter and similarly prized by people who like shiny things). Fortunately, I'm not a wealthy Venezuelan, although being wealthy would be nice. Anyway, you're quite right to say that my comments betray certain prejudices, and naturally they owe something to what I've been reading over the years. We all have prejudices, after all, or where would we even begin? But I'll be very glad to check out the two websites you listed, and who knows—maybe I'll find something in them that will force me to question some of my assumptions.
Also, I just want to remind anyone following along at home that the whole discussion began with the question of whether the price of gold has kept pace with (or outpaced, or lagged behind) the American dollar over the years. Also, while it's undeniably true that somebody who bought lots of gold in late 2001 is doing very well right now, this is still a very short-term projection. But it seems to me that it quickly transformed into something much more interesting—namely, a discussion of what a thing's value consists in. When you (Prestonp) say that people all over the world value gold, you're quite right. When you continue that thought and add that it's not going to stop, you might be right. You probably are right, but not necessarily. People used to think tracing each others silhouettes was a fun way to pass an evening. Not so much, anymore.
This has been fun. I look forward to the argument over how to evaluate and measure the real impact of inflation when I get around to adding that graph. Buck Mulligan 05:37, 23 March 2007 (UTC)

Hey all. I am quite surprised that my suggestion has led to such a firestorm of discussion. I've been keeping up with the discussion and there are a few points on which I feel I might be of some help. As to the issue of "stocks being normally listed in nominal terms". This is an artifact from wall street and is designed to make companies' earnings seem better than they are. This is deceptive and the same practice should not be adopted here. I haven't been extensively thorough in my search but I can definetely say that the DJIA, NASDAQ, and S&P500 pages on wikipedia do NOT have any graphs in nominal terms. I don't know why this page ought to be any different.

I think the graph of "gold in nominal terms" is essentially a piece of suggestive propaganda. The graph ultimately becomes about inflation and not about the value of the commodity. We might as well have a wiki page entitled: "wax paper as an investment" and list the price of wax paper in nominal terms over time. The graph will create the appearance that if you'd bought wax paper 40 years ago, you'd be rich today.

In the interest of NPOV, I suggest that all historical graphs showing gold in nominal terms be either replaced with graphs of gold in real terms, or, if this cannot be done or agreed upon, the graphs themselves ought to be removed entirely. Gold in terms of a comprehensive basket of goods serves as a far superior indicator of worth than gold in terms of dollar bills. The point is obvious enough. Taking the example of wax paper again. Measuring the value of gold with the changing (falling) value of the dollar makes as much sense as measuring the value of wax paper with the value of a Super Nintendo. Since the value of the Super Nintendo has been gradually declining over the last 20 years we would be adding a confusing variable to the whole equation.

I'd ask that people please take me seriously despite the fact that I'm talking about SNES and wax paper. I only bring such trivial things into this discussion to highlight the fact that dollars and gold are simple commodities like any other and don't deserve special treatment.

All in all, I don't really understand why this is so controversial. If this were any other economic/financial page I would make the same request. It is solely in the interest of eliminating variables for the sake of intellectual clarity. It has nothing to do with "proving" something about gold as an investment.

http://oregonstate.edu/cla/polisci/faculty/sahr/goldp_files/image002.gif SJCstudent 16:02, 23 March 2007 (UTC)

I'd want both or neither. Personally, I'm not a big fan of graphing gold in dollar terms at all because you end up with a bizarre flat line for most of it because of the gold standard. If you've just gotta have a CPI adjused Gold graph, there's one here (http://www.sharelynx.com/chartstemp/FreeGoldSilverCPI.php). I perfer the Dow-Gold ratio graph you can find at the same site (http://www.sharelynx.com/chartstemp/DowGoldRatio.php) because it shows meaningful performance of gold versus stocks over a 200 year time frame. Quite relevant to this discussion really. Prestonp 16:47, 23 March 2007 (UTC)
Well either way. I don't really care so long as the graph data on this page is meaningful. I do like the Dow/Gold ratio one as it shows clearly the relative expansion of the economy and real growth (if we assume gold doesn't vary). SJCstudent 17:44, 23 March 2007 (UTC)

Ok, great. I'm glad to see this problem fixed. Thank you all! SJCstudent 15:24, 27 March 2007 (UTC)

[edit] Comparing different forms of investment in gold

In an article on "gold as an investment" it seems a good idea to have a section on the advantages and disadvantages of investing in various forms of gold, one compared against the other. For instance, jewellery vs physical bullion vs gold mining shares. And unallocated gold bullion vs allocated. Paul Beardsell 07:33, 23 March 2007 (UTC)

[edit] Gold vs shares

A strongly held opinion in the polite debate on graphs, two sections above, is that gold is a much better investment than shares. This deserves to be explored.

  • That gold has outperformed USA stock markets over the past five years might be true, but five years is a very convenient period to choose. Comparing over 20 years does not show gold in a good light.
  • That the US dollar value of gold has increased so much in the last few years is partly owing to the decline in the US dollar. Gold has still risen in price in other currencies but not quite as dramatically.
  • An investment in gold does not generate more gold. An investment in shares generates (in general and on average) capital growth and dividend income. Comparing the change in gold price to the change in a stockmarket index neglects any dividends paid by the shares.
  • One has to pay to store one's gold.

Paul Beardsell 07:41, 23 March 2007 (UTC)

Paul, you are again mistaking my opinion. In general, I haven't made a blanket statement that Gold is better than stocks. As with all investments, you have to analyze the particulars and the general environment. In essence, what I'm arguing is that stocks make money, while Gold is money; in a time of political stability, vehicles which make money should be expected to outperform vehicles which are simply stores of value. However, going forward from this particular moment in history, yes I am unequivocally saying that Gold's performance over the next few years will put stocks to shame. Over the decade of the 1990s, stocks appreciated 250% while Gold fell in value by a third or so. This is aberrant behavior and one would expect a regression to the mean to cause stocks to underperform going forward and gold to catch back up. That Gold has not kept pace with CPI over 1980-2000 is a strong argument of how much it has to rise. Prestonp 15:22, 23 March 2007 (UTC)

You are so convinced that you argue on this page that gold is a good investment because it has done really well in the last 5 years and then immediately above that gold is a good investment because it fell so far in the previous 20. In logic terms you say A (gold price has risen) implies B (gold price will rise) and not-A implies B. Essentially you are a believer in B. The arguments do not matter to you. Paul Beardsell 00:28, 24 March 2007 (UTC)

Paul- I couldn't really follow whatever you're trying to say. Prestonp 04:55, 24 March 2007 (UTC)
Really? Paul Beardsell 21:43, 25 March 2007 (UTC)
Really really. Prestonp 23:48, 25 March 2007 (UTC)
That's a pity as you won't be able to comment. Paul Beardsell 11:27, 26 March 2007 (UTC)
Cheeky. Prestonp 17:51, 26 March 2007 (UTC)

I'm in the middle of writing a paper right now, but I can't resist putting in my two bits. Still, I'll try to keep this brief.

Preston: what Paul seems to be trying to say is that, regardless of whether the price of gold rises or falls, you will interpret the sitation to mean that the price of gold will rise.

Paul: What I think Preston is actually saying is simply that gold is currently undervalued, and so he expects its price to rise in the next several years. I suppose if the price of gold quintupled or sextupled, Preston wouldn't expect it to rise anymore. But you'd have to ask him.

As anybody who's been reading my posts knows by now, I have a hard time accepting the argument that something like gold can be assigned a value in such absolute terms. SJCstudent seems to agree with me on this. Nevertheless, and as much as I hate to admit it, Preston's probably right when he says that gold will continue to rise, for the next little while at least, thanks to geo-political uncertainty. Of course, as Paul points out, this fact is mitigated by the fact that the U.S. dollar has fallen like crazy in the past couple of years; you might not be so excited about your gold if you'd bought it with Euros or pounds sterling. And furthermore, if the dollar were to continue dropping, the States would see some serious, '80-style inflation, and then we'd really find out how well gold holds its own against the CPI. You might not be so excited about that $1200 ounce of gold when your groceries cost five times what they used to.

But this whole portion of the debate is beside the point, since the question all along was about how gold has fared over the long term as a hedge against inflation, and we got our answer last week: It pretty much sucks, since it hasn't kept up with the CPI, never mind outperforming it. What the price of gold does in the future is a matter of speculation, which isn't exactly the kind of thing a person looks for in an encyclopedia. When this bit of school-related business is over, I'm planning to insert an inflation-adjusted graph to reflect what we've been discussing, unless somebody else wants to add one first. Buck Mulligan 01:31, 28 March 2007 (UTC)

Buck, I'm glad you're coming around to seeing that Gold will rise over the next few years. As for keeping up with CPI, my prediction is that it will blow CPI away from this point forward as the only reason it wasn't was because of manipulation in the market. That's my view and you don't have to sign up for it, but I I've studied on the topic a good deal and I believe it to be the truth. Also, I could insert a CPI graph in here (I provided a link perviously) but I like the Dow-Gold Ratio graph better. Prestonp 03:50, 28 March 2007 (UTC)
I feel like the issue is being missed here. It doesn't matter whether or not gold is a "good" investment. People invest in it for a host of reasons and like most investments (especially commodities) there is a fair amount of volitility and risk. No one knows that gold "will go up". If people did, gold prices would have already risen to reflect expectations. Prices are determined by collective knowledge and expectations. But this is off topic.
I like the Dow-Gold graph too. This is primarily because it does a great job of showing that the market has consistently out-performed this static commodity over the long run. It supports my personal theory that economies grow because of investment and NOT because of speculation (which is the only way anyone can make any money on gold). I also like the graph because it connects the value of gold to something that people actually invest in (DJIA) and not something that they don't (dollars). But I still think that a CPI-adjusted graph would be extremely helpful as it would be the most reliable "unchanging" value to which to tie gold and better understand its long run performance. SJCstudent 11:31, 28 March 2007 (UTC)
If you define the long run as the last 200 years of American history, stocks are the bomb. If you define the long run as the last 200 years of German/Russian/African history, or as the last 4000 years or world history, then Gold is a store of value that outlasts anything else. This challenges your assertion that "the only way anyone makes money in Gold is through speculation." Also, no one to my knowledge has asserted that economies grow because of speclation. I'm glad your personal theory has reached the same conclusion. To me, CPI is a rather flawed measure of inflation, but I've already provided a graph showing Gold's CPI adjusted performance. So I'd apprciate it if everyone would stop saying "I really should" and just do it. Prestonp 11:51, 28 March 2007 (UTC)
Look. I didn't mean to offend. It is pretty obvious at this point that you have a lot of emotion invested in this. The fact is simple: no one "makes money on gold" except by speculation. Holding value is distinct from generating value. Simply put: no reasonable person should expect gold's value to increase apart from exogenous factors (speculation, hoarding, firing rocketship payloads full of gold into the sun, etcetera). Also: this is a discussion page. It is specifically designed so that before any major changes are made, we may discuss them to ensure editing wars don't start. I posted a link of CPI adjusted gold prices days ago but I was trying to err on the side of caution when editing the article.
I wonder why this issue evokes so much passion from people. There must be some very strong fundamental ideas connected to gold as an investment. You don't see people as fanatical about defending investment in copper, palladium, platinum, burlap, aluminum, propane, cotton, wool, heating oil, soybean oil, or zinc... All of which would keep their value for countless years and would serve as an inflation hedge. SJCstudent 12:33, 28 March 2007 (UTC)
You have made two incorrect assertions: one being that I have a lot of passion in this discussion, and the other that that no one makes money on Gold except through speculation. You are welcome to your assertions, but don't hold them up as self-evident. Many investment advisors of both yesterday and today have encouraged people to hold Gold as part of a well-balanced portfolio. It has a long track record as a store of value in tumultous times. I can't speak for other commodities based investors, but I find it a tad irksome that I get lectured by people who haven't invested the time that I have in understanding the underlying economics of today's market system. In particular, I am at a loss as for why people would come to the "Gold as an investment" page and seek to denounce the idea that Gold is an investment at all and then be perplexed that at encountering resistance. It's not like I hang out at ragingbull.com and tell people their stock picks suck. Prestonp 14:00, 28 March 2007 (UTC)
This is an encyclopedia article, not a place for gold investors to spout off. This shouldn't be the alternative to "ragingbulls.com". I haven't come here to "seek to denounce that gold is an investment at all". I've never made a claim that even resembled that remark. My only claim (which is unimportant anyway) is that there is no reason for the value of gold to increase in the long run. The simple matter of fact is that gold does not generate wealth. I don't appreciate being called ignorant on this because you have done nothing but continually reassert the same claim. The reason some people say that a portion of your wealth ought to be put in gold is because it holds value. But it certainly does not generate value. Do you see the difference?
Even T-Bonds have averaged about 0.6% adjusted interest over the last 90 years. Gold, on the other hand, has no reason for endogenous growth. Period. Aside from short term speculation, any long run gold investor can only hope that the whole economy begins to lose value in order to see the value of gold rise. If you think that I am wrong on this, be thorough in demonstrating it or curb your objections. I have no interest in arguing this point. I was only concerned about the accuracy of the article. SJCstudent 14:24, 28 March 2007 (UTC)
If you agree with the statement that "Gold is a store of value and a safe haven in times of economic turmoil" then we agree. For that matter, I already put in the article that "assets that show a return on value will out-perform those that are merely a store of value during times of poltiical stability". If you agree with all that, then I don't see what this discussion is about. Prestonp 15:19, 28 March 2007 (UTC)

What about adding another column to the gold price table (tracking the period 1910 to 2005)?

  • $20.67 US invested in a US bank account in 1910 including compound interest and any revaluations of currency (I believe there was a 41% USD devaluation in 1934). nirvana2013 10:16, 11 April 2007 (UTC)
Why not? Although up until 1935, banks were not insured, so there was risk of loss. Prestonp 20:29, 11 April 2007 (UTC)

[edit] Dow/Gold Ratio

How can the Dow/Gold graph go back to 1800 when the DJIA was was created in 1896? -- Scott eiπ 08:28, 31 March 2007 (UTC)

The index was created then, but the companies that comprised it predated the index. He used the value of the companies prior to 1897. Prestonp 22:13, 31 March 2007 (UTC)